This is the first of a three-part series
Q: The LOS space has seen a significant shift in the past couple of years toward lenders investing in end-to-end platforms. Why is this?
Kelly: The old end-to-end versus best-of-breed debate has been going on for years, and you’ll get a hard stance position from respective vendors operating on each side of the fence. Best-of-breed vendors will always state that that no end-to-end vendor can do everything as well as they can. End-to-end vendors will say that they handle the entire lending process efficiently and that the best-of-breed approach muddies the waters. There are degrees of merit to both.
Our position is that there are some best-of-breed vendors that are so specialized at what they do, that an end-to-end LOS provider would be remiss if they attempted to engineer and support certain functions of the lending process that are completely out of their wheelhouse. A couple examples are disclosure compliance, valuation management and fraud protection, to name a few. These types of functions assume huge amounts of responsibility and liability. The sheer compliance risk involved in these areas and needed robustness of the solutions is better suited for a partnership and integration. In this regard, end-to-end LOS providers need to be very selective about the specialized vendors they integrate with and must ensure that it is a truly seamless interface that does not disrupt workflows.
Another notable difference is a best-of-breed vendor’s cost and time factor to develop and maintain integrations. A really good integration is no easy undertaking. And maintaining it is a whole other challenge. New software versions and updates are rolled out all the time. Developing too many integrations raises the possibility that something will break.
One trend that emerged in recent years is technology firms that simply acquire other technologies in an effort to create an end-to-end platform. But at the end of the day, these are still disparate technologies that are pieced together by multiple solutions to establish an all-in-one solution as opposed to actually engineering it from the ground up. That said, the solution may technically qualify as an “end-to-end;” however, it isn’t designed by a single vendor, and it oftentimes uses multiple databases, and has feeble pairings of technology and rough workflows.